Ownership Structure

He posted his source though, credible or not, you said you'd do the same.......

 

Credible and independent?

Just a query as to why you use one to back up your arguements and not the other

 

Or ex

 

I’d be interested in who owns the German agencies we have been using to bring in the substandard players to City. They come here, we pay a fee, they leave after gaining “a years EFL experience”, we pay a fee, they sign for another club...agent gets a fee.

 

Have we used these agencies, do the players have agents and have we paid fee's for these players?

 

come off it. you can't tell me that a random posting something with nothing to back it up is a 'source' now. it's exactly the same as me posting what I did. thats why I haven't named a 'source'

 

I think the answer is fairly close to home, to be honest.

 

I don't believe him. I was just interested to see where you got your info from as well.

I.wqs hoping it wasn't the same person who told you the Oldham players had driven over.

 

Sorry for the long post, but having seen some of the speculation around the holding structure I have decided to do a bit of my own research. I appreciate this is my first post on here but I used to go on C&B now and again, just don't have much free time at the minute. Here are my findings:

ER Sportsgroup GmbH is a German company which is owned 22.5% by Edin Rahic and 77.5% by ER Investment GmbH. ER Investment GmbH on the face of it seems to be controlled by Stefan Rupp & Michaela Rupp (I think Michaela could be Stefan’s sister, but I haven’t done too much digging on that).

The latest financials I can pull for ER Sportsgroup GmbH are dated 30/06/2017 so a bit out of date. They also contain very little information – just a balance sheet. What they do show is the following:

Fixed Assets: €6.98m – No detail but educated guess is that this is primarily the investment in BC Bantams Limited which ultimately owns Bradford City Football Club Limited. It would put the purchase price at around £5.5m.

Cash: €142k

Other Liabilities: €6.25m – Listed as payable within one year €714k, payable in more than one year €5.541m.

Accruals - €14k – Could be accountancy fees or similar – immaterial

Capital - €850k

The interesting part here is the other liabilities. In a note to the balance sheet it states that liabilities of €6.19m are owing to the shareholders. My speculation would be that this is a loan from Stefan Rupp or one of his controlled companies which enabled the company to purchase Bradford City. Interestingly the liabilities balance increased from €5.56m to €6.25m from 30/06/2016-30/06/2017. Again, pure speculation as I have no evidence, but my thoughts would be that this loan has not been paid back at all and the increase in balance is purely down to interest which would put the interest rate at around 12%.

The capital of the company (which I believe will comprise share capital + retained earnings) decreased by €400k in the year, meaning the company made a loss of €400k. If I am right about the loan interest, then that was around €700k meaning the company had to have received income during the year of around €300k to give a €400k loss. That is providing this company had no further costs and we don’t know that because there is no P&L account shown.

As far as I am aware the company only has one source of income and that source of income is its investment in BC Bantams/BCFC. The only way that this company can generate cash to repay this loan is to extract cash from BCFC. How can it do that? Well looking at the balance sheets of BCFC Ltd and BC Bantams Limited, both companies have negative retained earnings. What that means is that neither company can pay a legal dividend until those retained earnings become positive. Another way could be to extract via interest on a loan but there is no loan showing on the balance sheets. This is a good thing, in other cases of foreign owners buying football clubs they have saddled the actual football club with debt, this has not happened here so even if SR called in his loan it would not affect the football club and put them in liquidation. My speculation here is that the intention is for ER Sportsgroup to provide management services to BCFC and for that the club will effectively pay a management fee. This will of course reduce the amount of profit available for spending on actual football operations. They may have been such a payment in this case but there is not enough information available to tell.

In terms of the actual accounts for the 2 UK companies they are bland and nothing significant to report. The club made a small profit between July 2016 and June 2017. There is no P&L account, so we cannot see detail of any management recharges or salaries. There have been rumours of ER and his wife’s salary. None of that information is on the public record so if somebody does genuinely know those figures then they have been told them by someone close to the club or obtained by somehow seeing the payroll information.

What do we take from this? The actual football club isn’t saddled with debt itself so that means SR can’t call his loan in and force the club into liquidation to repay it which is obviously good news. The bad news is that it is probable SR will want repaying at some point and the only way to do that is to extract funds from the club. In my view it would be foolish to extract significant amounts at this point in time when the club doesn’t make fortunes anyway. Is he prepared to sit tight and hope the club can make it to the championship where the rewards are much greater? Obviously if he does this the balance on the loan will continue to mount up. I have no idea what the relationship between ER and SR is like but if I had €6m riding on BCFC being successful I would be pretty concerned!

 

Thanks for the detailed analysis.
Looks like ER's & SR's relationship will start to get frayed soon enough, with no hope of further funding.

 

Which is exactly why Stefan needs to remove Edin one way or another. Unless he's rich enough not to care about his 6m, in which case we're screwed.

 

Ok - taking your points in order. Shareholders capital - that is the one I am least sure about, I will come back to that one.

Verbindlichkeiten - Do you have a copy of the balance sheet? On the second page there is an analysis and it states (translated from google) "The following rights and obligations apply to the shareholders:" then it has the Verbindlichkeiten amount of €6.192m and underneath it states "The figures also include the amounts attributable to the managing directors". I took that to read that €6.192m is owed to either the shareholders or directors which is either Rahic, Rupp or one of their companies. I don't think Rahic has that sort of cash so that is why I assumed Rupp.

I paid for a few documents earlier from the Unternehmensregister. Most had nothing relevant in but I did find the shareholders list. I was debating whether or not to share on here but think I would prefer not to even though a public doc.

Back to the share capital, I am not too sure but what I suggested was best guess. That would mean 300k income coming from somewhere, could that be a management recharge? We don't have enough information to know with certainty.

I agree with your other points. ER doesn't have the cash, is SR going to put anymore money in, knowing he has €6m plus original share capital investment at risk? I doubt it given Edin's track record so far. I honestly don't know what the future will bring, maybe it depends on how much SR needs €6m and if he has the appetite to speculate any further.

 

Thanks for this.

If you are correct, and there is an interest rate of around 12% attached to the funding which purchased the club, then that is a very hefty rate in the current economic climate. Do we know if the interest rate is compound or a fixed amount paid per annum?

How the club generates around £700,000 a year to cover this lord only knows on a revenue of less than £3m. These financials just do not add up.

I honestly feel less reassured about the future of the club after reading this and @Dennis contribution.

 

I have only got a maths o level/gcse, so no point looking at me but;

If rupp/rahic cannot take out dividends on a loss making club, can they take out funds as "management fees" each year and watch our beloved player budget shrink each time?
When you see the experienced dross we have signed, maybe i have my answer.

 

I honestly don't know. My figures around interest etc are nothing more than educated guesses as there is nothing concrete to go on. Whilst the interest rate is high, would you fund what is a high risk venture without getting a decent return?

Right now (if my thoughts are correct - and I think @Dennis broadly agrees) I don't think that the club is funding £700k a year. I suspect it may be contributing around EUR300k a year but have nothing concrete to base that on. The German holding company is making a loss as it isn't bringing in enough to cover the interest. Whether or not that is sustainable may depend on if SR is willing to invest any more cash.

 

Perhaps the loss is expected and acceptable whilst in L1 with the expectation that eventual promotion to the Champ would bring in enough revenues to start to turn a profit?

 

I know plenty and they're not running football clubs